Should Dollar Rate be an Excuse for Car Price Increase? NO!!!
The dollar rate and car rates in Pakistan are deeply linked as auto companies have repeatedly blamed it for car price increase in the past. Since August, the dollar has been on an upward trajectory as it reached Rs174 from Rs152. And because of this, there are strong rumours in the market that the prices will go up again. But is it justified to hike the car rates with a higher dollar rate? Let us briefly discuss.
Romance With Dollar and Car Industry
As mentioned earlier, the US dollar rate reached Rs174 from Rs152, making a jump of around Rs22. And it seems logical that the car companies will increase the prices. However, let us remind you that the current prices were set when the US dollar stood at Rs168 in 2020. On the other hand, these companies didn’t reduce the prices when it went down to Rs152. So, there was a difference of Rs16, but the benefit was never shifted to the consumers as prices remained same.
The prices did come down in Pakistan, may be for the first time, after July 2021. But it happened after Annual Budget was announced. In the budget, the government reduced different taxes including, Sales Tax, and Federal Excise Duty on the vehicles, leading to reduction in car prices. So, it was a favour from the government, not from the car manufacturing companies.
But now there are chances that the prices will go up with dollar. as there is a difference of Rs22. But remember that this difference does not apply on these companies. For them, the difference is around only Rs6 because we earlier told you that current car prices were set when the dollar rate was Rs168. Henceforth an increasing the rates on a mere difference of Rs6 is totally unjustified.
A Drop in Dollar Rate
And there is another twist in the story: a reduction in the dollar rate in the last few days. From Rs174, the greenback rate has come down to around Rs171, and experts believe that it will further slide in the coming days.
And, despite this development, if companies announced a car price increase, it would be not right. Although there is an uncertainty in the market currently, but as we said earlier dollar could not be used as an excuse for price hike in the local market.
However, if there could be any reason, these could be it.
Back in April 2021, we wrote another article on the similar topic. At that time, car companies like Toyota Pakistan and Proton Pakistan gave their point of view on the issue. As per the companies, along with dollar rates, other costs of the auto industry have increased extensively. The companies said that Freight Charges, Material Costs, Overheads, and Air Shipment Costs have increased in the last couple of years due to COVID-19 restrictions.
In short, these could be the reasons for another price hike, but not the dollar rate.